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amount of $24,000,000 to be deposited into the Project Fund and used to finance costs of the
Project.
Section 4.2 [Reserved]
Section 4.3 Purpose Investment; Program Investment.
(a) The Loan Agreement provides for payments by the Borrower of principal,
premium, if any, and interest in amounts and at times sufficient to pay the principal of, premium,
if any, and interest on the Bonds at maturity or upon redemption. As set forth in Section 4.4 of the
Loan Agreement, the Borrower will also pay the Issuer a one time administrative fee in connection
with the Loan consisting of an issuance fee in an amount equal to one tenth of the outstanding
principal amount of the Bonds at Closing, or $115,000, payable on the Issue Date (collectively,
the "Administrative Fees"). There will be no ongoing fees (whether as an issuance fee or
otherwise) owed or payable to the Issuer after the Closing.
(b) Bond Counsel has advised that Section 148 of the Code generally prohibits
the use of the proceeds of a tax-exempt bond issue to acquire "investment property" (as defined
in Section 148(b)(2) of the Code) which is reasonably expected to produce a yield over the term
of the issuance that is "materially higher" (as used in Section 148(b)(1) of the Code) than the
yield on the bond issue. The Loan Agreement constitutes "investment property." The Loan
Agreement is a "purpose investment" though, because it was made to carry out the governmental
purpose of the Bonds.
(c) Bond Counsel has advised that the Loan Agreement is a purpose
investment that is also a "program investment" because (i) at least 95% of the cost of the Loan
Agreement represents a loan to a person providing housing and related facilities, (ii) at least 95%
of the receipts of the Loan Agreement are used to pay principal, interest, or redemption prices on
items that financed the program, to pay or reimburse administrative costs of those issues or of the
program, to pay or reimburse anticipated losses directly related to the program, to finance
additional purpose investments for the same general purposes of the program, or to redeem and
retire government obligations at the next earliest possible date of redemption, (iii) the program
documents prohibit any obligor on a purpose investment financed by the program or any related
party to that obligor from purchasing bonds of an issue that financed the program in an amount
related to the amount of the purpose investment acquired from that obligor, and (iv) the issuer has
not waived the right to treat the investment as a program investment.
(d) Bond Counsel has advised that, as provided under Treasury Regulations
Section 1.148-2(d)(2)(iii), the yield on purpose investments acquired with the proceeds of a tax-
exempt bond issue will not be deemed to be "materially higher" than the yield on the bond issue
if its yield does not exceed the yield on the Bonds by more than one and one-half (1.50%)
percentage points.
(e) The Issuer reasonably expects not to receive any payments under the Loan
Agreement except for (i) payments by the Borrower of principal, premium, if any, and interest in
amounts and at times sufficient to pay the principal of, premium, if any, and interest on the Bonds
at maturity or upon redemption; and (ii) the one time Administrative Fees described above in
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